US natural gas futures overcame an initial bout of profit-taking to settle 4.5 percent higher and touch an over two-year high on Wednesday on expectations of stronger heating demand amid forecasts of colder-than-normal temperatures in early January. After climbing about 3 percent on Tuesday, front-month gas futures for January delivery on the New York Mercantile Exchange rose 16.9 cents or 4.5 percent to settle at $3.930 per million British thermal units (mmBtu).
Prices touched a session best of $3.994, a peak since December 2014, ahead of the expiry of the front-month January contract on Wednesday. Analysts said US utilities likely pulled 222 billion cubic feet (bcf) of natural gas from storage during the week ended December 23, according to a Reuters survey on Wednesday. The forecast draw compares with decreases of 209 bcf in the prior week, 50 bcf in the same week last year and a five-year average withdrawal for the week of 80 bcf.
If the poll estimates are correct, this would be the first instance of the amount of gas in storage falling below five-year average levels since May 2015. The front month has had a volatile run for the past several weeks. It rose over 7 percent last week, but dropped 9 percent a week before. It is up over 18 percent so far this month on a colder weather outlook.
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